iNovia Capital has raised one of the only private-sector funds in Canada geared toward making large investments in fast-growing “scale-up” technology firms, a move hailed as a significant step for Canada’s flourishing tech sector.
iNovia set out last year to raise a US$500-million “growth” fund specializing in leading US$50-million to US$100-million financing rounds by rapidly growing software firms generating millions of dollars a year in sales. It recruited the former chief financial officers of BlackBerry Ltd. and Google parent Alphabet Inc., Dennis Kavelman and Patrick Pichette, respectively, to co-lead the fund with managing partner Chris Arsenault.
The firm has now raised US$400 million, saying it could still add another US$100-million before its final close. iNovia also announced it had raised another US$200-million fund that will invest in earlier-stage firms, its fourth such vehicle. Mr. Arsenault said the firm decided to raise the early-stage fund about a year earlier than anticipated – it closed its last fund in early 2016 after raising $180-million – in response to investor demand. He dismissed a question about whether iNovia fell short of his goal for its growth fund, noting the total capital raised was well in excess of the $424-million raised in total over its three previous funds. “I think this is a huge step forward,” he said.
Observers of the Canadian venture-capital scene agreed, saying it was an achievement for iNovia to become only the second standalone private-equity firm in Canada, after Toronto’s Georgian Partners, to raise a sizable growth fund. “Raising US$400-million for your first growth fund is pretty good,” said serial entrepreneur Michael Hyatt, a Georgian backer and adviser who is considering investing in the iNovia fund. “It’s hard to raise that kind of money in Canada.”
Mr. Arsenault said iNovia derived more than 90 per cent of the growth fund’s proceeds from Canadian investors, including Royal Bank of Canada, Toronto-Dominion Bank, National Bank of Canada, fund-of-funds investors Teralys Capital and Kensington Capital and Stephen Bronfman’s investment firm Claridge Inc.
“It’s been an incredible journey for” iNovia, said Jacques Bernier, managing partner with Teralys Capital, a long-time investor. Mr. Arsenault, a veteran entrepreneur, cut his venture-capital teeth working for billionaire entrepreneur Charles Sirois’s Telesystem Ltd. during the dot-com bubble, and co-founded MSBi Capital, which provided seed funds to tech firms spun out from three Quebec universities, before co-founding iNovia in 2007.
The firm became one of several entrepreneur-led Canadian venture-capital firms in the past decade to improve on the sector’s dismal results, backing some of the better-known names in Canada’s teeming early-stage technology sector. Those include smart glasses maker North, video-hosting platform Vidyard and Dragon’s Den star Michele Romanow’s latest venture, Clear Finance Technology Corp., an online financier better known as Clearbanc. iNovia was an early backer of Montreal retail software firm Lightspeed POS Inc., which has filed to go public on the Toronto Stock Exchange, as well as Luxury Retreats, purchased by Airbnb in 2017 for $400-million.
Mr. Arsenault said it is critical for more Canadian investors to step up and back Canadian firms as they scale into significantly sized firms, noting the bulk of big cheques “still comes from foreign investors, or the company ends up being acquired too early. I think we have the ability to build and support more than one billion-dollar company [in Canada] every decade.”
Claridge president and CEO Pierre Boivin said the Bronfman family, a past investor in iNovia and tech firms, "recognize[s] there is an opportunity for experienced Canadian investors to support more effectively our companies with capital and expertise, thereby truly giving them the means to scale further and fulfill their potential.’’
The iNovia growth fund will initially invest US$20-million to US$30-million per firm. Mr. Arsenault said the first two investments should be announced within weeks.